Online Personalization 2.0: This Time It's Personal

After the flame-out of early business models focused on online personalization – for instance Firefly – it was easy to dismiss this as another over-hyped casualty of the dot-com boom. But there was nothing fundamentally wrong with the technology or the concept. It was primarily ahead of its time. Now personalization is an integral part of leading e-commerce sites such as iTunes, Amazon and NetFlix, and a contributing factor to their success. However, beyond this top tier, use of personalization is not yet widespread online.

All of the macro trends - expanded product selection, consumer-generated content and information overload - suggest that personalization is poised to come back in a big way. What's needed for mass adoption is a new business model rather than new technology.

Trends

First, let's look at the trends that build the needs and the opportunities for personalization

Product selection. The "Long Tail" phenomenon was first coined by Wired in 2004 to describe how, removed from the constraints of the physical world, the economics of retailing and the behavior of consumers have changed radically. Where a traditional retail store could only dedicate shelf space to high volume products, an e-commerce site can stock literally millions of products.

Consumer-generated content: Partly in response to distrust of marketers and professional critics, partly in response to the ease of personal publishing/blogging, consumers are posting their views, profiles and opinions online en masse. An estimated 33 million Americans have rated or reviewed products online. Social networks like MySpace and Facebook have become a cultural phenomenon. The combined voice of consumers is a powerful force. Study after study shows that word of mouth by far carries the most influence on purchase decisions.

Information Overload: Unfortunately, consumer-generated content is often lacking in relevance. A consumer reading conflicting reviews of the same product is often left asking: what do people like me think of this? Was the one-star book review from an English professor, or from a high school dropout? Further, it is often difficult to separate objective feedback from self-promotion.

While online retailing offers consumers unlimited choice, this choice can be paralyzing. While word of mouth often provides objective peer opinions, just as often it creates more confusion without any filter on relevance.

Existing Solutions

New online services and technologies are starting to emerge to solve these problems. The site Trendwatching.com has coined the term "Twinsumer" to describe matching consumers up with "their taste twins; fellow consumers somewhere in the world who think, react, enjoy and consume the way they do." These solutions address real and growing consumer concerns:

Tell me what's right for me

Help me explore beyond the mainstream, or in the words of Wired, push people down the long tail

Personalized recommendations are typically driven by statistics, in the form of "collaborative filtering", or by the user's own network of contact. In collaborative filtering, "like users" (or "like items") are matched based on their statistical similarity. So it Bob and James liked 10 of the same books, the 11th book that James rated 5-stars would be recommended to Bob. Or if customers who buy the Godfather Part 1 also buy the Godfather Part 2,... well you get the idea.

In the social network approach, recommendations are driven by your friends, or by people you have chosen to bring into your online circle of trust. This operates more like traditional word of mouth, but on a much larger scale.

These personalization solutions tend to be tied to either e-commerce or affiliate marketing business models:

In most cases, personalized recommendations have focused on product categories with a) broad selection and b) subjective tastes. Hence, books, music and movies.

Challenges

With all of the promise of personalization to increase sales and improve customer loyalty, you'd think its use would be more widespread. However, every personalization application faces the dual, and opposing, challenges of critical mass and data quality. The best recommender technology is worthless without enough data to populate the recommendations. In categories with a broad selection, such as books, recommendations are not very effective beyond the most mainstream titles until the number of ratings/purchases reach the hundreds of thousands.

So how to get hundreds of thousands of data points from customers before you can offer effective recommendations? Most e-commerce sites use observed customer behavior – clicks, searches, carted items and purchases – to infer product feedback. While this is the quicker and easier path to critical mass, it sacrifices data quality. Just because a user clicked on or even bought an item does not mean they liked it. Often the customer purchased a gift, did not enjoy the product, or had a one-off need for the product. I suspect other people have a similar mish-mash of recommendations at Amazon as I do: from gardening tools to lullaby CDs to Accounting books.

These data challenges – not technology limitations - have kept personalized product recommendations out of all but the very largest, most sophisticated e-commerce sites. And let's not forgot about traditional brick and mortar retailing, which still accounts for 90%+ of book and music sales. When was the last time you got "personalized" service at a big box retailer or chain store?

A New Approach

There's no good reason why every retailer shouldn't be able to implement personalization as well or better than Amazon or iTunes. At least in books, music, movies, video games and probably consumer electronics and travel. In this new world of ASPs, Web 2.0, APIs and web-services, the technical barriers have been all but removed.

Which leaves the data. A new business model that can successfully aggregate anonymous customer data and product reviews across multiple retailers could be far larger, and more predictive, than any database within a single merchant. And literally any retailer, down to a single-store independent bookseller, could tap into the benefits by also contributing to this uber-database. If this sounds farfetched, note that Abacus Direct grew a similar cooperative database model into a $100 million business in the offline catalog market.

The benefits are clear for those sites who have successfully implemented personalized product recommendations: dramatic improvements in sales, conversion rates and customer loyalty.

John Black has a long experience with personalization and predictive modeling. John was the product manager for the first one-to-one online banner ad targeting product at DoubleClick, and managed market research and new product development at Abacus, the leading predictive modeling company in the catalog market. John is currently the founder and CEO of NextFavorite.com (http://www.nextfavorite.com), a personalization service provider.

10 Most Recent Articles Written by John Black

Most Recent "Business Online" Articles

Four Tips For Creating An Effective Authors' Resource Box
Written by: Bill Platt |
Distributed: 2013-08-27 |
Word Count: 1669 |
Page Views: 4169
| Votes: 8 |
Rating: 2.38
In article marketing, there are many factors that will
affect your articles' ability to promote your website in
the most effective manner. In this article, we will briefly
discuss a couple those factors, before we dive into how to
create an effective Authors' Resource Box, also known as
the About The Author Information.

Website Traffic Generation: Winning the Love of the Traffic Fairy
Written by: Bill Platt |
Distributed: 2013-08-24 |
Word Count: 1149 |
Page Views: 4731
| Votes: 6 |
Rating: 1.83
Some people still believe that all they have to do is build
a website and customers will magically appear on their
site... Once they have built their websites, they wait
anxiously for the "Traffic Fairy" to come and sprinkle its
magic dust on their website too, so that they can make lots
of money like other success website owners.

Top 10 Reasons Why Online Marketers Fail With Article Marketing
Written by: Bill Platt |
Distributed: 2013-07-31 |
Word Count: 1025 |
Page Views: 3913
| Votes: 6 |
Rating: 2.67
If you've been marketing products online for any length of
time, you've likely heard people talk about the power and
promise of article marketing for the promotion of your
online business. Unfortunately, many online marketers have
tried to utilize article marketing to benefit their online
business and failed. In this article, I document the top ten
reasons why people fail to find success with article
marketing... And how to fix your article marketing
campaigns...

Article Marketing Tip: Stop Trying To Sell From Within Your Articles
Written by: Bill Platt |
Distributed: 2013-07-30 |
Word Count: 1229 |
Page Views: 2489
| Votes: 3 |
Rating: 0.67
The basic premise of article marketing is to present people
information that will be important to them, then at the end
of the article, present information "about the author" and
offer to the reader a means to see how the author can help
the reader further. When done well, article marketing
continues to be one of the most effective methods of
promotion that one could employ online.

The Six Degrees of Internet Marketing
Written by: Bill Platt |
Distributed: 2013-07-30 |
Word Count: 991 |
Page Views: 4541
| Votes: 6 |
Rating: 2.33
The theory behind the Six Degrees of Separation is that all
people on earth can be connected together in as little as
six steps. Now, I know what you might be thinking at this
juncture... That sounds fun and interesting, but what does
that have to do with Internet Marketing? That is a great
question that I am going to answer for you in this
article...

How To Win More Eyeballs for Your Offers and Websites
Written by: Bruce Lansing |
Distributed: 2013-07-29 |
Word Count: 1373 |
Page Views: 2322
| Votes: 3 |
Rating: 0.33
Most people using search engines on the Internet are looking
for answers to questions and solutions to problems. If you
can give people what the answers they want, you will be able
to position your business as one worth hiring today or
tomorrow.

How To Increase Your Rates and Earnings As a Freelance Writer
Written by: Bill Platt |
Distributed: 2013-07-29 |
Word Count: 1191 |
Page Views: 2555
| Votes: 3 |
Rating: 0.33
Freelance writers fill a very important role in today's
business marketplace. They create the on-demand, customized
content that business owners everywhere need to push their
businesses forward. In this article, the author explains
what freelance writers should do to ensure that employers
will pay them well for their services.

Promoting Your Business With Content:: Defining Your Writing Strategy
Written by: Bruce Lansing |
Distributed: 2013-07-25 |
Word Count: 677 |
Page Views: 2217
| Votes: 3 |
Rating: 2.00
Many people suggest that you should write articles on the
basis of the benefits that people will get from reading your
articles. I'd like to suggest that there is a better
reason, and that is to write your articles on the basis of
what problem people will be able to solve, as a result of
reading your articles.

Most Viewed "Business Online" Articles

Attracting Readers to your Book
Written by: Alastair Hall |
Distributed: 2006-05-18 |
Word Count: 708 |
Page Views: 44889
| Votes: 9 |
Rating: 2.11
One of the common and obvious ways to market a self-published
book is having your own website. The harder part is how to
attract your target audience and then convert the sale.

How To Make Visitors Bookmark Your Site
Written by: Cheryl Miller |
Distributed: 2006-10-10 |
Word Count: 536 |
Page Views: 37361
| Votes: 13 |
Rating: 2.38
When visitors bookmark your site it is a sign that you have built
a great website and are pleasing them. Visitors think highly
enough of your site to want to return and possibly tell others
about it. You are not only increasing traffic from your existing
clientele you are encouraging new traffic by means of viral
marketing.

Successful Article Marketers Help Readers Solve Problems
Written by: Bill Platt |
Distributed: 2013-07-24 |
Word Count: 816 |
Page Views: 22429
| Votes: 26 |
Rating: 3.04
Every week, I have the opportunity to speak with people about the
benefits and challenges of using article marketing to promote an
online business. Article marketing is about getting your sales
message in front of potential customers and to get links to your
website. Many interpret this to mean that an article should
directly promote a website within the article, but that approach
is wrong and will reduce one's success using this methodology.

Tips For Building Your First Website
Written by: Benny Tsabba |
Distributed: 2007-05-30 |
Word Count: 1511 |
Page Views: 18139
| Votes: 10 |
Rating: 2.30
New people are coming online everyday. And many of those people
desire to turn their spare time into spare cash. So begins their
journey.

The Importance Of Effective Follow-up
Written by: Kate Smalley |
Distributed: 2007-01-15 |
Word Count: 493 |
Page Views: 12661
| Votes: 10 |
Rating: 3.20
Marketing experts say that following up with clients is crucial
to successful selling because most prospects do not buy the first
time, according to Aweber, a leading autoresponder company.
People must encounter a marketing message multiple times before
making a purchasing decision.

Today's Google Bots and What They Do
Written by: Kim Roach |
Distributed: 2006-08-02 |
Word Count: 1061 |
Page Views: 12443
| Votes: 8 |
Rating: 3.25
Google currently indexes over 8 billion web pages. However,
before these pages were placed in the index, they were each
crawled by a special spider known as the GoogleBot. Unfortunately, many web masters do not know about the internal workings of this virtual robot. This article will attempt to
reveal some of the most important Google spiders, their function,
and how they affect you as a web master. We'll start with the
well-known GoogleBot.

Successful Forum JVs and How To Get Them
Written by: Diana Barnum |
Distributed: 2006-06-15 |
Word Count: 648 |
Page Views: 9243
| Votes: 11 |
Rating: 2.18
The forming of common alliances, also referred to as a joint
venture (JV), happens nearly every day in the business world.
One of the most popular means of linking people up online of so
that they can work together on their projects is via forums,
where people of all levels of business and expertise post in
common threads.

Highest Ranked "Business Online" Articles

How to Keep Your Article Content Fresh and Interesting
Written by: Craig Ritsema |
Distributed: 2006-08-29 |
Word Count: 699 |
Page Views: 3864
| Votes: 17 |
Rating: 4.18
Webmasters everywhere are constantly on the lookout for fresh and
interesting content for their website. Along with these content
qualities is the requirement that it be unique. Everyone wants
their website to stand out above the others in the search engine
results. So what is the trick for you to keep a steady supply of
this quality content coming your way?

How To Use Your Race To Get Rich
Written by: Herbert Harris |
Distributed: 2009-07-07 |
Word Count: 1407 |
Page Views: 4544
| Votes: 40 |
Rating: 4.05
Amid recent news reports that there continues to be an ongoing
and substantial gap between the net worth of Whites and other
racial groups, it is easy to be distracted and overwhelmed by the
raw data. However, I am immediately reminded of a quote offered
by an economic expert from the past... "There are lies, damned
lies, and statistics!"

Secrets of Domain Parking - An Innovative and Easier Way to Make Money
Written by: John Khu |
Distributed: 2009-02-27 |
Word Count: 484 |
Page Views: 3945
| Votes: 7 |
Rating: 4.00
Using a good domain parking services to monetize expired domain
names seems to be a neglected aspect with a number of domain
names traders. Domain parking is also an unfamiliar concept to
many inexperienced domain name traders. Read this article to
better understand domain parking and how it can be of benefit to
you.

The Most Important Ingredient for Info Product Success (is You)
Written by: Judy Murdoch |
Distributed: 2008-04-15 |
Word Count: 981 |
Page Views: 4040
| Votes: 13 |
Rating: 3.92
Last week I was attending a conference and mentioned to someone I
help small business owners create information products. The other
person was very friendly until I said "information products."
Then the temperature in the room dropped about 10-degrees

How To Build A Website That Will Rank Well In The Search Engines?
Written by: Fred Schebesta |
Distributed: 2007-04-23 |
Word Count: 1064 |
Page Views: 7098
| Votes: 9 |
Rating: 3.89
Redeveloping your website can be a real challenge when you assume
your web designers and developers understand search engine
marketing. Unfortunately this is not usually the case. Most
designers are great at making pretty pictures and developers are
great at making great technology. But pretty pictures and great
technology don't necessarily give you great search engine
results.

The Role of Hunger in Your Business
Written by: Mark Silver |
Distributed: 2009-01-21 |
Word Count: 1016 |
Page Views: 2024
| Votes: 5 |
Rating: 3.80
Hunger and fear are good for your business. Not abject hunger and
despairing panic, mind you. That's too much. But a little touch
of hunger and fear is very useful. I know there are many people
out there who would prefer that not to be the case. And I'm one
of them. I wish inspiration and love were big enough motivators
for action. But for us humans who aren't yet enlightened, they
don't seem to work so well.

The Importance Of Creating Resistance In Your Copy
Written by: Bill Platt |
Distributed: 2009-09-10 |
Word Count: 2009 |
Page Views: 2681
| Votes: 5 |
Rating: 3.80
"Creating Resistance in Your Copy" is an idea that is
alien to most online marketers. After all, online marketers
want to believe that everyone should buy their products and
services, because the more people buying what is being sold,
the more money the marketer will inevitably earn.